New York 22.5 Hour CE Course Pac
~Content Detail~

Basics of Real Estate Finance

• Define and explain the use of the principal financing instruments: the note, the mortgage, and the deed of trust
• Name major sources of mortgage loan funding in the primary market
• Identify and explain the role of the primary players in the secondary market

Government Influences on Real Estate Finance

• Explain the significance of the Federal Reserve Board as it relates to mortgage lending
• Name and explain the functions of the government agencies most influential in home mortgage financing
• Describe the most significant Congressional Acts that apply to home mortgage lending

Current Trends in Mortgage Lending

• List the benefits and criticisms of the current trend toward computerized loan approvals, including the "drive-by" appraisal
• Name the three major credit repositories and the source of credit scoring most commonly used today
• Describe the factors influencing an individual's credit score and ways to improve scores
• Explain the new concept of "risk-based financing" and its potential influence on the real estate market
• Recognize the influence of the growing immigrant population on today's real estate market

Conventional Mortgage Loans

• Describe the guidelines of the Fannie Mae/Freddie Mac conforming loans
• Explain the purpose of private mortgage insurance (PMI) and alternatives in practice today
• Calculate the borrowing power of a prospective purchaser
• Describe the affordable loan products offered by Fannie Mae and Freddie Mac
• List the components of an adjustable rate mortgage (ARM), the benefits and disadvantages
• Calculate the monthly mortgage payment on any given loan

Government Insured or Guaranteed Loans

• List the guidelines to be followed for both FHA and VA loans, including maximum loan amount, minimum down payment, qualifying ratios, seller contribution, and assumability
• Explain the costs involved and the purpose of the FHA mortgage insurance premium and the VA funding fee
• Make a list of compensating factors that may be considered to enable a borrower to gain loan approval
• Calculate the down payment, loan amount, and monthly mortgage payment for an FHA loan including any mortgage insurance, and for a VA loan including funding fee where required

Special Financing Alternatives

• Explain the various ways that sellers may be able to provide financing for the purchaser of their property
• Describe the essential elements of a lease-purchase contract
• Understand the special problems encountered by a self-employed borrower
• List alternative sources of cash for down payment and closing
• Explain the purpose and implementation of a reverse annuity mortgage

Introduction

• Understand the relevance of tax issues to the real estate industry
• Appreciate the effect of recent tax legislation
• Understand the purpose, structure, and features of this course

Home Mortgage Interest Deduction

• Identify the two main requirements for mortgage interest deductions
• Describe the limits on home equity loans when determining tax deductions
• Summarize the differences between acquisition debt and home equity debt
• List the three requirements needed for deducting interest on a qualified residence
• Summarize the general requirements that must be met for home mortgage points to be deductible
• Define the following terms: qualified residence, acquisition indebtedness, home equity indebtedness, interest, points, and secured debt

Taxation of Profit

• Explain the gain or loss formula
• Identify items that may be included in the selling price
• List items that may (or may not) be used as selling expenses
• Explain adjusted basis and why correct determination is valuable in determining gain (or loss)
• Summarize the differences between repairs and capital improvements and how this test applies differently for rental properties and personal residences
• Define the following terms: depreciation, selling price, selling expenses, adjusted basis, option, and capital expenditure

Exclusion of Gain Rule

• Define principal residence
• Explain when the gain realized on the sale or exchange of a principal residence is tax free
• Identify the tax planning ideas that have been replaced (i.e., 24-month rollover and over-55 one-time exclusion)
• Summarize the §121 requirements to exclude up to $250,000 or $500,000 MFJ (married filing jointly) from gross income
• Explain what happens when one spouse qualifies and the other does not
• Define the following terms: MFJ (married filing jointly), principal residence, and §121 qualification

Applying the Passive Loss Rules

• Explain RREAs (rental real estate activities)
• Summarize requirements for material participation in rental activities
• Describe the three common tests to define material participation for real estate investors
• List at least three types of taxpayers who will benefit from the 50 percent participation and 750-hour requirements

Office-in-Home Rules

• Summarize the three criteria to establish an office-in-home deduction
• Define principal place of business
• Describe which transportation costs may be converted to business mileage
• Cite examples of direct and indirect expenses that are used to calculate the office-in-home deduction
• Calculate the office-in-home deduction
• Describe how the office-in-home deduction creates a taxable gain when the home is sold

Essential Elements

• Describe the advantages and disadvantages of investments in real estate
• Identify the four main categories of investment property and list the significant characteristics of each
• Define basic key terms and concepts in real estate investments
• Calculate rent per square foot and rent due on percentage leases

Financial Anatomy of Investment

• Understand and explain the basic financial elements involved in a real estate investment
• Define key terms in income and expense analysis
• Use your learned skills to perform a basic financial analysis of a real estate investment

Establishing Market Value and Return

• Identify the elements of value in a real estate investment
• Define key terms involved in the valuation process
• Perform the analysis necessary to establish an investment's value
• Perform the analysis necessary to determine return on investment

Listing and Marketing

• Describe the types of listings and compensation arrangements relevant to real estate investment transactions
• Define the key concepts and terms involved in marketing a real estate investment opportunity
• Identify marketing opportunities and develop a marketing plan for a real estate investment
• Describe and apply the skills required for closing an investment transaction

Professional Property Management

• Trace the evolution of the property management profession
• Explain the different classifications of real property and the various property management challenges involved with each
• Describe the principles of economics that affect the property manager's decision-making process
• Understand the process of researching and creating a management plan

The Owner-Manager Relationship

• Explain the terms of a typical property management contract
• Describe the procedures involved in taking over a property
• Distinguish among the various types of owner-manager relationships

The Management Plan

• Understand that identifying and achieving the owner's objectives are the manager's primary objectives
• Describe the process of putting together a management plan

Leases and Tenant Issues

• Describe the basic leasehold estates
• Distinguish among the types of residential and commercial leases and describe the characteristics and uses of each
• Outline the fundamental components of a typical residential lease and the rights and responsibilities of both the lessor and lessee
• Understand the importance of state and local law in governing landlord-tenant relations

Managing Residential Properties

• Distinguish among the various types of residential property
• Understand the special challenges of managing condominiums and cooperatives
• Describe a cash flow analysis and how the manager assembles reports

Managing Tenant Safety Issues

• Understand the importance of the three-pronged, four-part strategy for dealing with emergency and life safety issues
• Identify the procedures involved in planning for emergencies
• Be aware of the importance of tenant security

Risk Management Basics

• List four components to manage risk: education, risk shifting, risk anticipation, risk control
• Recognize that brokers can reduce legal liability through a greater emphasis on educating their salespeople
• State two methods of shifting liability away from the broker: purchasing errors and omissions insurance and advocating the use of inspections or evaluations by third parties
• Summarize the value of seller disclosure statements in assigning responsibility to the seller for disclosure of property problems
• Explain that seller disclosure does not relieve the agent from inspecting red flags, and discuss the value of getting all oral representations confirmed in writing
• Identify procedures to handle problems, including immediate reporting to the broker and the need to properly handle complaints from clients and customers

Communication Practices

• Explain that intentional misrepresentation is active fraud, i.e., knowingly making a false statement about a material fact
• Explain that intentional concealment is constructive or passive fraud, i.e., knowingly failing to disclose a material fact
• Explain that making a false statement about a material fact when the broker should have known otherwise is negligent; a broker should not rely on a seller disclosure if the broker observes a "red flag"
• Distinguish between misrepresentation (fraud) and advice (suggestion)
• Identify at least five of the most common causes of litigation
• Summarize the importance of seller disclosure, checking with the local building departments, getting verification of repairs made in writing, the importance of hiring experts such as a surveyor, and learning basic "red flags" which should alert an agent
• List what agents may say and do without practicing law

Environmental Hazards

• State the major laws impacting environmental issues, such as CERCLA, SARA, RCRA
• Explain the dangers of exposure to asbestos and how experts deal with removal
• Discuss the widespread use of formaldehyde in homes and its long-term effects
• Identify characteristics of radon and explain how it is mitigated
• Describe the problems that develop in airtight buildings from accumulations of formaldehyde, radon, and asbestos and how buyers can use indoor air quality surveys
• Explain the effects of lead on people and list lead-based paint requirements
• Discuss the problems that develop when structures are built on landfill sites and how property values are lowered by close proximity to such sites
• Explain that both current and former owners are responsible for underground storage tank (UST) maintenance
• List at least three exemptions from UST requirements
• Identify at least five sources of groundwater contamination
• Describe places where PCBs are used (electrical equipment) and effects of PCBs when leached into the soil
• Summarize four precautions to reduce risk from environmental hazards

Agency

• Recognize at least five common causes of legal action involving agency issues
• List at least five possible consequences of breach of agency duties
• Itemize three steps to avoid legal action in relation to agency issues
• Explain subagency
• Describe the duties of a seller's agent to the seller and buyer/customer
• Describe the duties of a buyer's agent to the buyer and seller
• List at least five types of buyers who should be represented by an agent
• Explain the legalities, fiduciary duties, and potential dangers of dual agency
• Explain the consequences of unintended or accidental dual agency
• Describe the appropriate time to discuss agency representation with buyers and sellers

Federal Fair Housing Laws

• List all seven protected categories under Title VIII of the Civil Rights Act: race, color, religion, sex, national origin, handicap, familial status
• Identify at least five actions prohibited by the law: refuse to sell, rent or negotiate, or make unavailable after offer is made; discriminate in terms, condition, privileges, or services; lying about availability; no access to MLS; deny financial services
• Define steering, blockbusting, and discriminatory advertising, and give examples of each
• Provide examples of handicaps and explain prohibited and required actions when selling or renting housing
• Define a "family" and what constitutes familial status discrimination in rental and sale of housing
• List legal options an aggrieved party can take regarding fair housing discrimination
• Describe legal penalties that can be assessed in cases of fair housing violations
• Explain risk reduction recommendations

Americans with Disabilities Act

• Describe the basic requirements under the Americans with Disabilities Act (ADA) Title I—Employment
• List examples of "reasonable accommodations" when employing individuals with disabilities
• Explain how brokers can avoid claims under Title I by using written job applications, avoiding discriminatory questions, and learning what disabilities are covered under the act
• Summarize requirements under Title III—Public Accommodations and cite ways to reduce risk of legal problems with the ADA for brokers and commercial client

Antitrust Laws

• Explain that the purpose of antitrust laws is to protect competition and prevent monopolies
• Recognize situations that can lead to charges of conspiracies to fix real estate commissions or commission splits
• Explain that the Sherman Act applies only to contracts that unreasonably restrict trade
• Define and give an example for the illegal activities of group boycotts and tying arrangements
• Explain that the Antitrust Division of the Department of Justice investigates complaints and that the consequences of violations are severe
• List methods of reducing antitrust liability

Introduction to Red Flags

• Understand the meaning of the term Red Flag
• Learn why Red Flags are present in a home
• Be aware of the most common conditions that cause Red Flags
• Know who to contact for advice in various Red Flag situations

Soil and Foundation Red Flags

• Understand the importance of knowing your area's soil composition and basic geological characteristics
• Identify various different types of soil
• Explain the causes and effects of sinkholes, landslides, creep, and slippage

Exterior and Structural Red Flags

• Understand the significance of cracks in structures, driveways, sidewalks, patios, and basement floors
• Learn the importance of proper drainage, building ventilation, hillside instability, and fills as well as the Red Flags associated with the problems created by the improper conditions related to these situations
• Be aware of the problems arising from roof, window, and flashing leakage and the Red Flags present
• Understand where the areas in and around a structure are that can contain possible defects and the Red Flags associated with these types of defects

Red Flags in the House

• Be aware of and learn to pay special attention to the several areas inside the home that can contain Red Flags
• Learn the procedures for detecting Red Flags in areas of the home such as floors, doors and windows, fireplaces, stairways, and glass panes
• Learn possible locations for concealed Red Flags and be aware of the reasons for concealment
• Understand what the major mechanical systems in a home are and learn where to look for Red Flags in each of the systems

Environmental Red Flags

• Have a general understanding of the health hazards posed by the most common environmental Red Flags
• Understand the structure of government regulation of the environment and the names of various federal agencies that can provide additional information and guidance in detecting and dealing with environmental Red Flags
• Understand where hazardous materials may be located in a residential property
• Learn the Red Flag indicators identifying environmentally hazardous materials

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